SDV Insights

Several businesses have commenced litigation in Florida against first-party commercial property insurers seeking coverage for business interruption losses resulting from state and local government orders enacted to mitigate the spread of COVID-19.

If you are an attorney, insurance broker, or other professional representing developers and contractors, then your clients have likely reached out with concerns about losses related to COVID-19. One common question is whether there is potential coverage under builders risk insurance policies.

Louisiana, Pennsylvania and South Carolina are considering legislation that would mandate coverage under property policies for business interruption losses resulting from the COVID-19 pandemic. These states join the growing group of states that are considering enacting such legislation, which now includes New Jersey, Massachusetts, Ohio and New York.

When submitting an insurance claim for losses due to COVID-19, the policyholder's rightful expectation is that their insurer will handle their claim fairly and in good faith. However, a growing collection of lawsuits allege that certain insurers are not living up to this expectation and are denying coronavirus-related claims in bad faith.

The draft legislation, entitled the Pandemic Risk Insurance Act of 2020 ("PRIA"), would establish a Federal Pandemic Risk Reinsurance Fund and Program (the "Program"), that is intended to provide a system of shared public and private compensation for business interruption ("BI") losses resulting from a pandemic or outbreak of communicable disease.

In response to the large number of COVID-19-related losses that businesses are experiencing, insurers have begun issuing statements informing their insureds of whether their policies will respond to the losses, and if so, what coverage will be afforded. Insurers cannot take a "one-size-fits-all" approach to the COVID-19 losses because, besides factual differences, the losses are occurring within all fifty states which means 50 different state law interpretations will apply.

As the COVID-19 pandemic affects companies' economic performance, we anticipate an uptick in Directors & Officers (D&O) Liability claims. Attempts by companies to downplay the effects of supply-chain disruptions or overall performance due to shutdowns are potential minefields for D&O claims

One aspect of many first-party property insurance policies that has been largely overlooked in association with the recent Coronavirus outbreak is protection of property coverage. Protection of property coverage, which can be found as a coverage extension or even as a condition in the policy, can take a variety of forms, but generally provides coverage for costs incurred to temporarily protect and preserve the insured property.

On March 26, 2020, Michelin-rated Napa Valley restaurants, French Laundry and Bouchon Bistro, and their celebrity chef, Thomas Keller, filed the second known coronavirus-related declaratory judgment (DJ) lawsuit by a restaurant. The restaurants filed their DJ against Hartford Fire Insurance Company just seven days after Napa County issued a Shelter at Home Order.

Companies across all industries have been deeply impacted by the social-distancing protocols and economic slowdown caused by the COVID-19 pandemic. Naturally, competent business owners have looked to their commercial business and property insurance programs to determine what coverage, if any, they may have to offset the financial losses being suffered. To their dismay, many such entities have discovered that their policies specifically exclude losses related to virus.